Euro crisis: fiscal union heralds a dystopian future
First Reaction: EU’s Greek bailout Mk II comes with fiscal union – but will it end in tears?
Eurozone leaders yesterday agreed a second bailout package for Greece that paves the way for greater fiscal union. Greece is to be given another €109bn - an amount that includes €37bn from banks and private investors. It will see the interest rate at which it borrows cut to 3.5 per cent, and will be given up to 30 years to pay back some of the debt.
But the restructuring of Greece's debts is likely to be declared a default by credit rating agencies. The 'temporary' default should not cause as much chaos as an 'ordinary' default as it should only last around two months.
As part of the deal, the prospect of what French President Nicolas Sarkozy called a ‘European Monetary Fund’ moved closer, with the current eurozone bailout fund being given the power to stave off future debt crises much earlier by buying up the government bonds of struggling countries and lending money. This is being seen as the beginning of an inevitable fiscal union for members of the single currency.
The eurozone's heavy weapons are in play. The markets may have welcomed the latest bailout, but what about the Greeks, asks the BBC's Europe editor Gavin Hewitt. "Doubts will remain as to whether, having won a second bailout, Greece will remain committed to unpopular austerity measures and privatisations. The programmes were already in trouble."
“With this plan the eurozone's leaders have deployed their heavy weapons, but it remains unclear what real difference these measures will have in bringing down Greece's huge debt mountain."
Told you so. Noted eurosceptic Conservative MP John Redwood, in the Times, relives the hardships and humiliations of being opposed to joining the euro over the past two decades. The British establishment's refusal to rule out joining the single currency in principle "left us sceptics on the margins of debate and usually on the wrong end of critical briefings", he writes. "It is no pleasure to see our forecasts now coming true."
Fiscal union is the beginning of the end for the EU. "The latest Greek bailout is the moment when continental Europe finds itself forced to transmogrify from a loose federation into a brittle unitary state," writes Simon Jenkins in the Guardian, pointing to the decline in support for the EU among richer, northern countries.
"If European politics starts to implode and return to xenophobia, manned borders, ethnic cleansings and trade boycotts, that start is now."
Germany realises its dream of empire at last. Peter Oborne sketches out a far more dystopian future for the eurozone in the Daily Telegraph. He believes European fiscal union will lead to the "economic destruction of the southern European countries", who face a future as "vassal states" similar to the European colonies of the 19th and early 20th centuries.
"They will provide cheap labour, raw materials, agricultural produce and a ready market for the manufactured goods and services provided by the far more productive and efficient northern Europeans," he writes. "Germany has come very close to realising Bismarck's dream of an economic empire stretching from central Europe to the Eastern Mediterranean." ·
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